STRAIT OF HORMUZ

In a recent Baker Institute paper, Dagobert Brito, Peterkin Professor of Political Economy, writes that the latest tensions in the Middle East are prompting policymakers to find alternative ways to get petroleum from its source to world markets. An estimated 20 percent of the world's oil passes through the Strait of Hormuz, the narrow sea-lane between Iran and Oman, and Iran"s threats to close the strait are escalating. Ensuring the safety of that oil is "crucial to the world's economy," Brito contends.

He focuses on a combination of geography and technology to resolve the dilemma, noting that, "...with a relatively low amount of investment, it would be possible to ship as much as 11 million barrels per day of Middle East oil production through the Red Sea." In addition, the growing regional rivalry between Saudi Arabia and Iran, Brito suggested, may make the Saudis "more receptive to proposals to augment trans-Arabian pipelines."

Brito emphasizes that any decision will come down to economics. "The question that must be addressed is whether the probability that passage through the Strait of Hormuz will be disrupted and the resulting damage to the world economy is high enough to warrant the investment necessary to bypass it."